Interest rates don't have to rise this year

Posted: 24 Jul 2006 17:11:24 GMT

The Item Club funded by the Ernst & Young group has stated in its latest report that the interest rate should remain at 4.5 per cent.

This is despite analysts arguing that the Bank of England will have to raise rates to cope with the level of inflation.

However professor Peter Spencer of the Item Club stated: "Core CPI inflation has fallen back in recent months, undermining the case for higher interest rates."

The CPI inflation rate should ease back from 2.5 per cent in June to 1.8 per cent by the end of the year. The Bank of England's target is two per cent.

Interest rate staying at the current level is good news for house buyers in the sense that mortgages will stay the same.

However the report delivers some stark warnings to the government. It is argued that Britain has performed poorly in breaking in to the Chinese and emerging Asian markets, and that it is behind France and Germany in terms of exports.

It is exports that provide substantial economic growth in the future and as always the housing market must listen to this analysis carefully.


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